tv The Kudlow Report CNBC December 28, 2012 7:00pm-8:00pm EST
our states. the beaches and waters couldn't be more beautiful. take a boat ride, go fishing or just lay in the sun. we've got coastline to explore and wildlife to photograph. and there's world class dining with our world famous seafood. so for a great vacation this year, come to the gulf. its all fabulous but i give florida the edge. right after mississippi. you mean alabama. say louisiana or there's no dessert. this invitation is brought to you by bp and all of us who call the gulf home. i like to say there is always a bull market somewhere, and i promise to find it just for you, right here on "mad money." i'm jim cramer, and i will see you monday. done. it's the right thing to do for our families, for our businesses and for our entire economy. but the hour for immediate action is here.
it is now. >> the president correctly says the time for immediate action is now. apparently not his immediate action, though, with the nation facing a crippling fiscal cliff in just three days, the president calls congressional leaders together and says, you fix it. no, he doesn't offer any new plan from the white house, no compromise. instead the president tells the senate to come up with a deal and the same senate that hasn't passed a budget in years. and the marks don't like it at all, 158 points now tanking and falling further in the after market and we'll have to see how asia opens on monday. it could be ugly. the headlines are falling fast and furious. we're all over it "the kudlow report" starts right now. welcome. i'm michelle caruso-cabrera in for larry kudlow. a lot happened in just the last couple of hours. >> michelle, there's
considerably more optimism after the white house meeting between the president and the four bipartisan leaders than there was earlier in the day. mitch mcconnell and harry reid say they're going to come out and try to hammer out a bipartisan deal that can pass the senate with enough republican votes to convince the house to act and even president obama who had been concerned that they were not going to act and challenging them for an up and down vote said he was optimistic. here's the president after that meeting. >> i just had a good and constructive discussion at the white house with senate and house leadership about how to prevent this tax hike on the middle class and i'm optimistic we may still be able to reach an agreement that can pass both houses in time. >> now what would be in that mini deal? we're talking about tax increases for people at near the top of the income scale. the question is the threshold, 400 or $500,000 are the likely places that that could end up. it would likely turn off the automatic sequester by using
some of the revenue from the tax increases to account as budget cuts and turn off they is quester and it would also extend unemployment benefits and do the so-called doc fix to prevent reimbursements from declining and also have a milk fix, michelle that would prevent the doubling of milk prices which would occur without an extension of subsidies. >> why aren't people more optimistic? i haven't heard about enough spending cuts that would bring republican spending cuts. why are republicans more optimistic now? >> they're concerned spending cuts would not be a part of this deal. i talked to an aide who said that opportunity would slip through our fingers and we'll make another round at the debt ceiling and we're trying to do something minimalist just to get us through the end of the year and avoid the consequences of the fiscal cliff and it is possible. it's by no means a certainty that they'll come up with something that can pass both houses and there is a chance and there appears to be more of a
chance than there was 24 hours ago. >> so you're telling me that republicans out there will vote to raise taxes without any guarantee of spending cuts in the future even though they've seen it over and over again. tell me why again you think that's possible. >> they'll tell you it's not a vote to prevent taxes and it's to prevent taxes on everybody, but a small number of people and they would blame the absence of spending cuts on president obama and they know the taxes will go up anyway regardless of what they do if they don't pass anything and they would make the argument they would limit the tax cut and speaker boehner has made the same argument. >> thank you so much. we want to show people what is going on with the after markets because even though john says people are optimistic the markets are not optimistic. right now if the dow jones industrial average were to open at this moment it would be down 315 points. that's a reflection of the futures trading that happens in the after-hours. we'll see how asia opens on monday and right now the markets do not like what they see. they are not optimistic at this
point and maybe if a mini deal gets done, a mini deal is not enough to deal with what the country faces. after all of this time the president still wants congress to come up with a plan instead of assuming the leadership mantle himself. let's talk to a member of congress about that. james langford serves in the house budget committee and he joins me now. sir, have you conceded you're not getting spending cuts are you voting on raises taxes on people who make over $250,000 come sunday or monday, whatever it is? >> sequestration is a debt ceiling deal from last year. we made a deal and the president and the house and the senate all signed off on it and said we would reduce $1.2 trillion. 120 billion a year and that's the minimum that has to be cut just to fulfill what we had agreed upon last year. the real issue here is spending. we're spending $1 trillion more a year than we were just five years ago. so you're not going fix it with
a few tax increases. you have to fix it. >> are you optimistic that something will happen by monday based on what you've heard from the president tonight? >> this is a senate issue and it's optimistic that mcconnell and reid will be able to sit down and talk through and be able to find a proposal and reid has been able to cram this the whole time that he's sitting down with mcconnell and it's a good sign to us and we passed all of the documents we needed in may and august for sequestration and tax policy and sent them over months ago in the senate and the senate has never answered and that's been our frustration on the house and this is the way it works and basic civics. the house passes something, the senate passes something and we come to an agreement to be able to resolve the differences. we passed something seven months ago and the senate has never answered. they've got to do this. >> let me be very clear about something. i do not think this country has a revenue problem. i think this country has a spending problem. >> i agree. >> you know perfectly well for a deal to get done you guys have
to see some kind of changes to entitlement, right? that's a bare minimum for you to save face and stick to your core principles and you know how the democrats are. they want to raise taxes on somebody. so is there any possibility that either side will budge on those two issues? >> we'll have to wait and see what happens. the president, as funny as it sounds, at the end of the press conference came out and said if the senate can't get this done, let's do the bare minimum, my plan and let's raise taxes on $250,000 and do that if you can't reach some other agreement. it's absurd on this. >> if there were real entitlement reform -- >> and there were real entitlement reform, would you be willing to raise taxes on anybody just so the democrats could save face and say they got a deal? >> it would have to be some pretty serious entitlement. >> like what? like what? >> we'll have to wait and see how that comes out. >> see, that's the problem? >> let's take the basics. you have food stamp issues with a lot of food stamp fraud that's out there and you have people
certified to get food stamps and i don't have an issue with someone who has an actual need and qualifies for it. i have a real issue when someone doesn't qualify it. >> this is my question i ask every republican. if the democrats had an epiphany and said representative ryan said we'll raise taxes on someone, anybody? >> first, i would say it's not a voucher program. >> you're spiriting my question. >> i would take it. >> it's not about your program. it's totally different than the voucher plan. i gotcha. >> yeah. i'd be able to be willing to look at it and say how do we resolve this to get the big picture done and they're not considering it. >> i know. i know. representative, thank yo much. have a good weekend. see you monday. >> hopefully we'll see what the senate sends back to us. >> yeah. thank you. there is some action in washington tonight. at this hour the senate has just passed a $60 billion aid bill for communities slammed by super storm sandy. that vote was 61 for, 33
against. sandy road ashore devastating several areas and the senate rejected a republican amendment to cut the immediate cost to just 23 million clearing the way for final action on the $60 billion bill. the bill now goes to the house where its passage is uncertain because of the non-sandy-related spending items that are in the bill. typical sausage making for washington. let's get to our panel. here now is blake zeff, former obama campaign aide and washington editor. robert, have you heard anything in the last couple of hours that suggests to you that somehow by monday mitch mcconnell and harry reid will sing kumbaya, pass something in the senate that also passes the house? >> i'm not so sure they'll be sing kumbaya, but the real story today is that there's movement on capitol hill. reid and mcconnell come out of that white house meeting and they're ready to haggle over some differences. what i expect to come to the floor is what president obama's talking about a 250 threshold for rates, maybe an amt attached
to it and maybe have unemployment attached to it, but that's it. that's what the president wants at the end of the day. the question for mccon cell this, can he raise that threshold now at the 11th hour from president obama's $250,000 perhaps to $300,000 or $400,000. >> and just concede on spending cuts. >> at this point the republicans are like a prizefighter on the ropes and they're not in a great negotiating position and the caucus walked away from john boehner and they're not in a position to say i want a, b and c. >> so the senate comes up with something. can it pass the house? >> i think i'm more in agreement with you than robert is in the sense that i'm not particularly bullish about the possibility of this deal because let's just look at the logistics of how congress works. the first step in this new process that the president just outlined is that he wants harry reid and mitch mcconnell to get together on the plan. you need a plan that will satisfy harry reid and his democratic caulk us and mitch
mcconnell who is featuring a tea party potentially in 2014 and that's a wide with swath of people and i would be quite surprised if we had a whole bunch of republicans in the house and senate who were willing to go along sort of giving up the store from their point of view which would be raising revenues through taxes and not getting the spending cuts that they like. >> that's a fair point. i think a the lot of republicans, you're right, for that reason. any kind of tax increase, some republicans will vote no. you have every republican on capitol hill acknowledging privately and publicly that come january 1st every single tax bracket goes up and they'll be answering to primary voters about what they did to prevent that. they may not win every single hand and they'll try to get $250 or $400,000 as a threshold that they can sell to their primary voters. >> it's not going to be enough to say to them there were no spending cuts in the deal and i couldn't with a good heart, vote for that for the country and say
we'll keep spending the way we're going to spend. >> i think you're bringing up a great political point and a lot of them will not go up to their districts and their states and that's a fair point and it's not the only point because a lot of republicans want to prevent tax hikes even if they're not getting everything they want in this deal. >> let's go somewhere that i don't normally like to go, but let's talk style for a moment and let's talk leadership. are you comfortable with the fact that president obama has now turned to the senate and said let's fix it. i like the way he looked at obama care and handed it off to congress and the stimulus bill that he handed off to congress. this is the one person doesn't have to bowe to the god of reelection. everybody else is subject to the things you have already talked about, their home. what would lbj have done, blake? not this. >> i would just be frank with you. i think it's an odd gamut. because look, as i just said i'm
skeptical about the ability of these two senate leaders to hammer out a deal that would satisfy both of their very competing, completely opposing imperatives and the next step the president said if you guys don't get a deal i'll ask harry reid to put a bill on the floor and we both know in order for that to happen mitch mcconnell will gra have to agree not to filibuster that and the president is daring mitch mcconnell not to engage in a filibuster and it would seem so embarrassing to the public that mcconnell was filibustering a deal for middle-class tax reform. i think that's a risky gamble. i guess the way he, the president, is thinking of it is either he gets that bill on the floor and mcconnell lets it go for a vote and he gets what me wants or we're going over the cliff which i think he probably feels is not such a terrible scenario for him, vis-a-vis the republicans. >> let me ask you, let's bring up the number of votes that harry reid got to get his job and what mitch mcconnell got to get his job and then the
president's. the president got 65.6 million votes. senator mcconnell got less than a million, 954,000 and senator reid, 363,000. a man whos had got 65 million votes has handed off the leadership of this key issue to two men combined who haven't gotten even 1.5 million votes. they represent fewer than 1.5 million people in america and he's seated leadershceded leade. why? >> obama has all of the power right now. the president had a meeting with congressional leaders and he knows at the end of the day what he wants that 250 threshold unemployment insurance extension, he's going to probably get it. he's going on "meet the press" first time he's going on in three years to put his foot on the republicans and senate republicans to say as this deadline approaches what will you do? will you prevent a small extension of tax rate increases. i'm offering you 250. are you going to take it or
leave it. that's hard ball politics. that's what obama is doing now. he's not ceding power. he's letting them haggle over the threshold and he's ending this argument and this debate. >> all right, gentlemen. good discussion. great to have you both on. guys, stick around -- oh, they're coming back. that's right. they're part of the fiscal cliff power panel. let's turn to the market sell-off. the dow going down 158 pointis and want you to see the after-market numbers and the futures, something called the futures continue to trade and they suggest that if the dow jones industrial average were to open right now it would be down 315 points. the nasdaq would be down a whopping 51 and the s&p 500 down 39. here now is larry glazer from the mayflower advisers and director at tjm institutional services. guys, when we open on monday, is it going to look that bad? jim? >> it depends on what happens. this is the way uncertainty works, but, you know, i thought for a month that one of two
things was possible, one that we go over the cliff and the republicans have ground cover to be lowering taxes and not raising them or these are guys who crave the stage. how are they not going to take it down to the 11th hour? they'll never be able to stand in front of their constituents and say they fought the good fight and by my logic it's still december 28th. this is not done yet. the risk is coming in on monday and have something good happen on sunday and it being up, 20, 25 handles. i'm not at all convinced that we'll be in the tank on monday morning. >> how about you, larry? >> michelle, today we sought fiscal fear and it's all been about fear and it's becoming the fiscal reality. the after-hours reality shows that fear is really out there. fear has been driving everything. consumer confidence has come down, consumer sentiment has come down and retail sales have come down and fear will drive the marks next week because investors dislike uncertainty. they want stability. they want confidence. we have none of that here.
the only place you have it is overseas. europe looks stable compared to the u.s. right now what does that say about our dysfunctional system? it says our dysfunction is our competitor's advantage in this market and that is sad. >> amen to larry. that was well said. i don't think i can add anything. >> for the average investor watching right now, any advice? >> no. i think that what's going to happen is there will be refl reflexive knee-jerk reaction higher if one of those two things i said happen. the market was up quite a bit since mid-november. the small-cap his been up 9.5% until the sell-off and they'd given a lot of that back, but there was a lot of good feelings priced in, and to me it's not that awful for us to take some of that off. i think the next month will be choppy and whipsaw, but 2013, there are a lot of good things going, housing market, china, japan. i would buy some things. >> guys, got to cut you off. larry, you'll get more time next time, promise. see you later, jim. we're all over the fiscal
fiasco. tune in to cnbc this sunday night. yep, we're working the weekend at cnbc, 8:00 p.m. eastern time for a cnbc special report "america's economy held hostage" because remember house of represent representatives called back into session sunday night. don't be too depressed. we did get good news today and it was important. a major strike that could have crippled the economy was at least delayed. we'll have those details coming up. she knows you like no one else.
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welcome back to "the kudlow report." let's give you an update on the developing situation in washington. there's no deal, no new offer on the fiscal cliff crisis. president obama has just told the two senate leaders they should make the deal. the results immediately felt in the financial markets. look where the dow closed down 158 points when it became very clear nothing was happening and now take a look at where the numbers are in the after markets. we would open now down 315 points on the dow if we started trading now. down 315 points. we have much more on this throughout the rest of the program, but the market's very
unhappy. we do have some good news to report tonight. looks like at least one cliff has been averted for the time being. the so-called container cliff. the union that represents dock workers and u.s. maritime lines came to an agreement today to extend their current contract for 30 days. this is a big relief now for the retail industry and consumers who were staring at real destruction again for the supply chain. here now is jonathan gold and he's vice president of supply chain and customs policy for the national retail federation. jonathan, good to see you. >> michelle, thanks for having me tonight. >> how dramatic, how bad would it have been if come next year, in other words, in just a few days we had a strike on all of the ports on the east coast of america? >> it would have been fairly significant if we would had a shutdown on all of the ports from the east to texas and it would affect importing, exporting, manufacturers who rely on inputs to production, farmers who are trying to get their products to market overseas, trucking companies who sold jobs to pick up containers
at the ports this would have been felt fairly wide throughout the u.s. economy. >> can you put a number on it? can we look at previous shutdowns of ports and what they cost the u.s. economy on a per-dayis bahhis, for example? >> sure thing. when we look back at what happened in 2002 we had a full shutdown on the west coast with a ten-day lockout. that lockout cost the u.s. economy about $1 billion a day and it took more than six months to fully recover from. >> i have to think that a lot of retailers have already tried to make alternate plans because they were fearful this was going happen and so as a result have started to spend money. did some companies start airfreighting stuff instead which would be much more expensive because of this? >> this is the second time a lot of retailers have had to do contingency planning. when it was set to expire in september, a lot of companies started doing the contingencies then and then back in november they started planning for the potential strike and the contingencies included shipping product to the west coast and to the west coast ports and looking
at an cade an ports and bringing products a lot earlier in the process and putting them in storage. >> wow! all right. a lot of complication and supply chain management is literally, you can major in it because it can be so complicated. jonathan, good to have you here. thank you very much. >> thank you very much. >> do you think smart money is relying on washington to make a good fiscal cliff deal in time? no. we're about to show you what the top minuty managers have been busy doing in order to protect their client's cash. that coming up. mine was earned off vietnam in 1968.
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>> once again, our developing story tonight, no deal still on the fiscal cliff. president obama handing the matter over to the senate leaders and without any resolution, many people are scrambling to shore up their finances. hampton pearson has the fiscal cliff frenzy. hampton. >>? >> you got it, michelle. we're operating in an environment where, quote, uncertainty is the new normal. this is the equivalent of the last-minute christmas shopping to protect assets of going over the fiscal cliff, planners and wealth managers say it's been a banner year especially for estate planning and here's a couple of reason yes. there's a big change coming with the gift tax. right now there's a $5 million exempted and the tax rate is 35%. on midnight on new year's eve the exemption drops to 1 million and the tax rate goes on 55% and the capital gains tax rate expected to increase from 15% to
20% and the brand new 3.8% medicare tax on wage earners above 200,000 a year and a possible future cap on general deductions is all part of that renewed interest and estate planning. among those closely watching what the president and top congressional leaders do over the weekend to avoid going over the cliff, millions of married couples facing a higher tax burden. the bush-era tax law which eliminated the so-called marriage penalty for joint filers is expiring, meaning with couples with next as little as $80,000 would be subject to taxation at the rate of the higher earning spouse. a nationwide survey done byic which chick chicago-based northern trust, yes, they've been more proactive in planning for the cliff versus those with $1 million or less and finally, that same survey had 44% of high net worth individuals saying their top priority for the country is economic growth and reducing unemployment versus 19%
for reducing the federal budget deficit. tax reform and to end the washington gridlock is also on the wish list, michelle. >> mine, too. >> thanks, hampton. once again, the big story tonight, no fiscal cliff deal and not even a new offer from the white house. three days to go. president obama asked the senate leaders to try to make a deal. we'll get more on all of it from washington next. so, this board gives me rates for progressive direct and other car insurance companies? yes. but you're progressive, and they're them. yes. but they're here. yes. are you...? there? yes. no. are you them? i'm me. but those rates are for... them. so them are here. yes! you want to run through it again? no, i'm good. you got it? yes. rates for us and them -- now that's progressive.
welcome back to "the kudlow report." i'm michelle caruso-cabrera in for larry kudlow. we continue to wait for a fiscal deal. president obama has punted the decision to the senate asking them to come up with a deal. the markets don't like it. they sold off today during the after-hours session and stocks are getting hammered. we haven't seen anything from president obama on the deteriorating relations with russia. vladimir putin banned adoption into law. is the president's trip to moscow early next year still on? first, we have to get back to the fiscal cliff impasse and the president's decision to ask the senate leaders to make a deal.
here now to ace cnbc contributor, biden's chief economist and jimmy path kukis of the american enterprise institute. will we have a deal by monday. >> >> think we are. if you had asked me before the president spoke i would have said no. >> why? >> because i can see a path. if mcconnell and reid can hammer out a deal that's acceptable to both of them i believe that john boehner will let that deal come up for a vote in the house, and i believe that vote will pass in the house though probably with majority democrat. if that happens, we may well have a deal. >> you said a big f, though. if mcconnel and reid can hammer something out. the senate hasn't passed a budget in years, jared. tell me, how is harry reid going to come up with something by monday? >> well, as you've been stressing for most of the show, correct me, this is not a budget. this is a last-minute deal that's going to have a few
components and i will count them on one hand that will have a tax threshold. 250. i wouldn't be surprised if they went to him with a higher number. u.n. extension, doc fix and the umt with the sequester and that would be it. >> jimmy p., what do you think? will we have a deal on monday and is it going to be enough? >> i think we will have a deal. one big difference now than maybe a couple of weeks, three weeks ago is a lot of republicans believe that eventually they really believe that the president would cave and they would cave again just like they did in 2010 that if he's so worried about a second recession would just smear his second term and he would cave. if you saw the president today in the news conference, he did not look like a guy about to cave to me. he's not going cave. this deal will go through. >> what's it going to be. >> will we be better off? i don't think so. >> 250? 400? where are you thinking in terms of where the cutoff will be on taxes? >> i see it going off to 200,
and i think democrats especially from new jersey, new york, connecticut, that would be fine with them and it's just a matter of damage control. >> and will republicans have to pay in any way for something that has no spending cuts in it. >> ideally, a lot of these guys would like to wait until january so they can say we voted for a tax cut and the new status quo is where all of the taxes have gone up. i'm sure there will be primary challenges. >> what do you think? >> first of all, let me be clear. i think 50/50 at best for exactly the reason you cited. i can't imagine that reid and mcconnell are having a happy discussion right now, so there will be serious differences there. for example, if mcconnell insists on keeping the estate tax parameters where they are instead of going where the president is, that completely seals the deal and that's one piece. >> michelle, you've made that point throughout the show, and i partially agree with you, but i
will tell you this. right now everybody in this town is focused on taxes and preventing 98% of households from seeing a tax increase and that's what's in these guys' heads and i expect you won't accept this, but it is true, $1.5 trillion in spending cuts have been enacted since we passed the budget control act and you may not want to score that because most of it took place last year, but those were real spending cuts on the books. >> jimmy p., 1.5 trillion when our yearly deficit is 1.2 trillion. is 1.5 trillion enough? >> remember, it was spez lead what the bond markets wanted and the s&p and the credit rating agencies wanted was 4 trillion in deficit reduction. what are we talking about right now? we're talking about an $800 billion tax increase and stopping the sequester and who knows it could be a spending cut. >> that's my concern.
they do this and then the promised spending cuts, you know what they're all going hear in their head. grover norquist telling them they never come. they're the unicorn that doesn't exist. >> a lot of republicans at this point will say, you know what? after all of this they may not be saying publicly now, but they'll say let's just take the sequester and at least we'll be cutting some spending and we'll be cutting the actual spending and take that sequester. >> last word. >> i don't disagree with you and jimmy on this point. this is not a deficit reduction deal that will stabilize the debt to gdp ratio and that has to be -- that has to be one of the goals of a broader deal that now we're probably going to be looking for on the other side of the cliff. >> yeah. i don't know. it doesn't seem to be any part of the president's goal. jared, good to see you always. jimmy, you, too. we'll get you guys back in just a few minutes. we'll get you to the roundtable if you haven't had enough yet.
what will it mean for banks? new analysis shows that the expiration ever tax cuts will improve bank savings in 2013, by, listen to this, 54%. in other words, people will need to pull their cash savings out to pay for higher taxes. here now is dan geller, executive vice president of market rates insight. dan, good to have you here. walk me through this math. you're saying the average american is going to put 54% less into savings this year because if we go over the fiscal cliff? explain. >> yeah. let's go back, michelle because the amount of taxation on an average household is effort mated at $2600, and right now the average savings -- bank savings per household is $5,000. so, yes, this would reduce the amount available for savings by more than half. >> when taxes have gone down, have you seen a subsequent rise
in savings and what people put away? >> absolutely. this is the analysis that they did, they compared the two before the tax cuts and after the tax cuts and we saw two things, overall deposits in banks doubled during the tax cut period since 2001 from $4 trillion to $8 trillion. so there was a doubling of the amount of money that consumers deposited in banks and on the levels, as i mentioned before increased from about $2500 a year average to about $5,000. >> it's not that savings will decline. it just will not grow as fast as it could have. explain the implications. i think individuals understand that, shoot, i won't be able to save as much money, but when money goes into a bank it doesn't just sit there, right?
there's what we call a multiplier effect because what do banks do with that money? >> when the money goes into a bank, basically the bank uses it as liquidity to fund loans. that's the main reason for the deposit. >> it starts businesses and allows people to buy homes. if you've ever seen it's a wonderful life and jimmy stewart standing at the counter explaining how banking works. it's that simple. >> exactly. >> so good to have you on. thank you so much. >> thank you. >> dan geller. be sure to tune in to cnbc on sunday night. we have a special report "america's economy held hostage," why sunday night you ask? because the house leadership is ng back. the house of representatives is coming back and congress will suppose lead work all weekend to come up with something to vote sunday night or maybe on monday. another leadership crisis involving the failing relations with russia. the adoption ban with the u.s. now in place. will the white house respond? will the president cancel his planned trip to moscow? we'll have more on that next.
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[ male announcer ] chevy's giving more. now through january 2nd, no monthly payments until spring for qualified buyers. get the silverado for 0% apr financing for 60 months plus $1,000 holiday bonus cash. plus trade up for an additional $1,000 trade-in allowance. well, if itmr. margin?margin. don't be modest, bob. you found a better way to pack a bowling ball. that was ups. and who called ups? you did, bob. i just asked a question. it takes a long time to pack a bowling ball. the last guy pitched more ball packers. but you... you consulted ups. you found a better way. that's logistics. that's margin. find out what else ups knows. i'll do that. you're on a roll. that's funny. i wasn't being funny, bob. i know. welcome back to "the kudlow report." we'll give you the life updates on the developments in
washington. live pe live pekt frurs the white house and capitol hill. the dow earlier closed down 158 points and then with the events that took place after the close, take a look at what's happening now. after-market numbers show that we would open down 315 points on the dow if we started trading right now. we have a lot more on this throughout the rest of the program. please stay tuned. we have another leadership crisis, this one in foreign policy. the russian president and vladimir putin signed bill banning adoptions by americans starting january 1st. it's likely 46 children who were to be adopted in the u.s. will have to remain in russia. on average about 900 children get adopted each year by americans in the soviet union, excuse me, from russia and there's been no formal response from the white house on this. here is former pentagon adviser michael rubin. >> thanks for having me, michelle. >> what should the white house do in response to this? >> ultimately, what with will
have to be inspected and considered is the whole nature of the reset policy. if we trace the beginnings of this crisis back it actually started with the white house reaching out to vladimir putin to russia in supporting russia's accession to the world trade organization. the amendment which had govern the a lot of u.s.-russian/soviet relations going back to the 1970s had to be replaced. it was replaced in congress by the act which set russia's worst human viets violators there should be consequences when it comes to getting visas. vladimir mute indecided to lash out to the united states by pointing a figurative rifle at the head of russia's orphans. >> we improve russia's trade relation with us, officially and then he gets upset because buried within there is a little clause that says, as you point out, the worst human rights violators should have trouble getting into the united states.
how far should we go, throw, right? i brought this up last night and i'll bring it up again with you. in the united states we believe that people all over the world have certain rights regardless of geography, regardless of ethnicity, regardless of religion. they are inalienable and it is unfathomable to us that there are parts of the world where they don't believe that. it's amazing, but true. how far do we go in pushing what we believe to be universal rights when we know we're going to get some kind of negative reaction? i mean, can we be tough or russia because they're less important to us than say, china or saudi arabia? >> i think the russians would like us to be tougher. what is quite interesting is that vladimir putin might have stepped out too far on this issue. there are 600,000 orphans in russia right now which is more than they had during the time of world war ii. now, oftentimes the russians and russian public opinion can be
quite anti-american except in this case almost 40% of russians actually support the act which when you consider it it's not a majority, but coming from a country that's often anti-american and public opinion that's really significant. >> when putin was signing the thing he said, so what if the living standards in other countries are better than ours? so what? i don't care. should we all move there? he doesn't really care. >> well, actually what he's touching on is another debate, a demographic debate which he is very worried about that many russians, young russians are leaving the country. russia's population is in decline. what president obama should do is stick to his guns saying we want relations with russia and a russia that abides by the rule of law, something ingrained in the world trade organization is important. the americans have compromised. john kerry who will be secretary of state, presumably when he was
on the senate foreign relations committee tried to amend the mittity insky act that the list of russian officials would be kept secret so that there wouldn't be any public naming and shaming. we bent over backward on this, but what president obama needs to ask is the united states getting any benefit for his signature reset policy. >> michael rubin, thanks for weighing in. >> thanks for having me, michelle. we'll get right back to the fiscal cliff coverage. we'll have the latest just ahead. don't move. over the south pacific in 1943. i got mine in iraq, 2003. usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection, and because usaa's commitment to serve the military, veterans and their families is without equal. begin your legacy, get an auto insurance quote. usaa. we know what it means to serve.
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weekend for senate leaders harry reid and mitch mcconnell. >> let's bring in our political and financial minds and ask them what's their cliff pick. jimmy pathkoukis, but i always call you jimmy. >> and robert costa. welcome back. gemmy, i'll start with you. if you can put together a deal that you think would work, what would it be? >> first of all, the key is a very simple word, compromise. democrats will have to understand a simple word even on entitlements and the cpi which cut social security benefits by $100 billion and he offered over 400 billion and republicans will have to stop this really crazy idea that we can achieve a sustainable ledger with
absolutely no new revenues. if they can prom promyself on those two basic points we'll have a good deal and the economy can get back to the job of recovering. >> robert costa, if you'll put together a deal that you think would work, what would it be? >> there's so much noise out there right now with the house and the senate side about what kind of deal should happen, but what this really comes down to is rates. middle-class rates and both party leaders want those things to happen. 250 or 400k, whatever it is and maybe somewhere in the senate, pass it and go home. >>. >> if he kept the tax code as is, do you realize it would generate $2 trillion as far as what i would do for a deal, one thing that's been forgotten is the hike in investment taxes. capital gains, dividends. if i was in congress i would be willing to expect higher rates on labor income, but we have to
keep those investment taxes low. obama wants to raise dividends like 43% and wants to raise cap gains at 23% and that's terrible. >> middle class at 500 grand is what you're saying. >> i would like zero, but, you know. >> how about you? >> i actually agree with robert on this one. there's one thing. amid the whole mess that we're in where no one can agree on anything, there's one thing that everyone in washington and everyone on this panel agrees in we have to set in motion the bush-era tax rates for the first quarter of income or the first 400,000, pick your number, not only is that something we can all agree on and it will it would avert a lot of the pain, not all of it, but a lot of the pain that people will have to endure and it was something that was litigated during the campaign that we went through and it's something that the nation supports. that's a quick, easy and sensible way to start this process. >> except for jared, you're almost all focused exclusively on hiking taxes. jared, let me go back to you and
entitlement reform. explain something to me. >> sure. >> we have democrats on all of the time and i do this on both sides of the aisle. if the republicans were willing to raise taxes on anybody and anybody that you wanted to, would you be able to say billionaires shouldn't get medicare or billionaires should pay more for medicare and the vast majority say no. why is the democratic party so resistant to medicare reform? >> i don't know that that's a fair representation although i know you're talking to these people. the president has means testing for medicare. in fact, by the way, medicare is means tested. >> not by much though, right? a millionaire and a billionaire, it's zero to their net worth. >> it's pretty fanarrow up at t top and frankly, it makes a lot of sense and i'm not the only democrat who with thinks that. >> look, i don't believe that folks are as unreasonable as all that. there are definitely people on both sides of the fringe, but everybody who has looked at any
budget knows -- >> why are democrats so apoplectic about raising the retirement age? >> that doesn't help is the problem. that actually leads to a more costly health care system. i don't think that helps, but it is true that we don't get to a sustainable budget without slowing the cost of health care and anyone wo doesn't appreciate that simply doesn't understand the long-term budget outlook. >> robert costa, will we ever see spending cuts? is anybody ever going to vote to cut spending? >> it's also a great question and it's also will a strategic question. a lot of folks want something to happen on the fiscal cliff and the one thing they don't want to include is an inclusion of the debt ceiling, an extension of the debt ceiling because come next year, early next year when we hit that debt limit again, they want to have spending cuts included with the debt limit negotiations and that's where the spending cuts i predict will happen during the debt limit and not the fiscal cliff. >> what's it going to look like
when we have this fight about the debt ceiling. >> robert just said that the one thing that has been brought up is the debt ceiling as part of the negotiation and the other thing that they've mentioned are the spending cuts and he'll make an offer to put those on the table and part of that is that these are not popular right now and we could have an intellectual exercise about whether they should be, about whether it's proper or not, but the political reality is barack obama just wants to campaign and the liberals did very well. ? they didn't win the house. >> what's that? >> they didn't win the house. >> you're absolutely right. you're absolutely right. from a messaging perspective, from a messaging perpective, was there not an aacclimation. >> i have to get jimmy in here. >> eebt ally the financial markets will send a message. you need to do something about
this debt and then we're talking draconian cuts and draconian tax increases and why we're not doing it now. >> what's your new year's resolution and what should congress' new year's resolution should be? >> i think it should be that they should not take the debt ceiling hostage as he was talking about earlier. if you want to go from the crazy self-inflicted wound to why the another episode then we should get out. the president should stick to his guns. do not negotiate on the debt ceiling. >> jimmy? >> at this point they might want to take the sequester. the goal for next year, reform the tax code so it's actually pro-growth. we want to keep 98% of the functioning tax code. >> robert and blake, i am so sorry. we've run out of time and you've all been great guests and i appreciate it. >> have a great weekend and be sure to stick with cnbc throughout the weekend for the latest on the fivenlgal cliff including sunday night at 8:00 p.m. the senate will be in session.
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